A Guide For Foreigners Seeking to Buy Property in Mexico

Owning property in a foreign country is a lifetime dream for many. Non-Mexican citizens can buy property in Mexico. When using a reliable real estate agent (like one from DH Realtors, of course), it can be a safe and easy process. All foreigners have the full protection of the law with regards to real estate transactions. You do not have to be resident in Mexico to own property here, so there is no need to immigrate or even qualify for resident status in order to invest in property in Mexico. You will need to check with your trusted agent or attorney to see how you will hold property title, prior to purchasing.

The Mexican Constitution had previously banned foreign nationals from owning property within the restricted border zones. This was intended to protect Mexican soil from foreign invasion. The Foreign Investment Law of 1973 was a constitutional amendment which changed this allowing foreigners to now purchase real estate free outright except inside the “restricted zone’; consisting of all lands within 100km (64 miles) from an international border and 50km (32 miles) from the coastline at high tide. For properties within this zone, foreigners need to use a bank trust called a fideicomiso. All real estate transactions involving these trusts are governed by federal law. Merida and all coastal properties fall into the restricted category. Outside the zone, you can own property with a title issued in your name.

The fideicomiso is a bank trust in which the bank acts as a trustee by holding the trust deed for the purchaser who is the beneficiary of the trust. The fideicomiso is authorized by the Mexican government through the Ministry of Foreign Affairs. The bank is the legal owner of the real estate, but the beneficiary retains all legal rights of ownership and as a result may sell, rent, and bequeath the fideicomiso or property to whomever they choose or their heirs.

The fideicomiso offers the buyer added securities since the bank is required to verify the property’s ownership and be sure that it is free of liens. The trust is established for a 50-year period which is renewable for another 50-year period after that. If the 50-year period expires without renewal, the owner has another 10 year period in order to submit an application for renewal. When a home or land is purchased with an existing fideicomiso, the remainder of that trust is merely transferred to the new owner or can be renewed at that time. The bank charges an annual fee for holding the property which is based upon its value.

Mexican corporations may be 100% foreign-owned and hold title to property within the restricted zone (without a fideicomiso). These corporations were once a popular option for foreign investors looking to buy within the zone. They now have more restrictions and also have further reporting and accounting requirements than the fideicomiso; making their use in purchasing property not as advantageous as in the past years.

Services of a notary public are required in any real estate transaction here. The notary ensures that all documents are in order and that all proper legal procedures have been followed. Mexican notaries are probably much different than their counterparts where you currently live. They are actual degreed and experienced lawyers who must be at least 35 years old and pass the notary exam before being appointed by the governor of their particular state. The notary fees are generally paid by the buyer.

There are other additional fees that the buyer should expect to pay at closing. The buyer generally pays the transfer of acquisition tax and all other closing costs as well. The acquisition and transfer taxes both run around 2% of the sales price. The rest of the closing costs vary from 3% to 5% of the stated value.

It is always recommended to use an escrow company! Property purchases here are cash transactions. Remember to use your best judgment when carrying out the financial portion of your property purchase in Mexico. You should use an American escrow company (at DH Realtors, we use Stewart Title) to safely hold the funds; just as you would back home.

Lastly, although they are minimal, don’t forget to pay your property taxes! If you should decide to rent your newly purchased Mexican home, be sure to consider the tax implications of the income generated by doing so. Your diligence in fulfilling tax obligations in this country is your responsibility in the end.

Buying a home, business, or other property in Mexico can be an exciting and stress-free experience; as long as you have knowledgeable and trustworthy people working on your side to guide you through the process here in Mexico. The owners and brokers of DH Realtors have been on the buying side of the transaction personally; here and in many other countries. They draw upon their own past experiences and concerns involving buying in a foreign land to assist in making the process of buying and selling in Mexico as worry free as possible for their clients.

DH Realtors is located in the spectacular city of Merida, the capital of Yucatan and the heart of the Yucatan peninsula. With over twenty years combined experience in the industry, handling property sales, rentals, management, construction, and renovation, we specialize and take great pleasure in finding that dream property for which our clients are searching to call their own. Whether you are looking to purchase, rent, or just enjoy an incredible vacation, we will be happy to assist you. Please feel free to contact us with any further questions or to start your adventure finding that dream home in Mexico.

David Harris has an extensive background in both the construction and real estate industries. A currently licensed U.S. building contractor, he studied architecture and engineering before entering the construction industry. Early in his career, David learned many construction trades: concrete and steel, framing carpentry, trim carpentry, cabinetry, roofing, timber framing, surveying, drywall, tile, and masonry. In North Carolina he worked as the project manager and estimator for several high-end construction companies tasked with building multi-million dollar vacation homes, townhome developments, and clubhouses in private golf club communities, while also running a remodeling and property management business. During this time period, David was also co-owner of Carolina Research & Development Inc., which developed building materials for patent and production, and Boone Development Organization, which did real estate and land development for residential subdivisions. Throughout many of these years, he owned, managed, and rented an all-inclusive villa in Montego Bay, Jamaica which overlooked the ocean. Not long after retiring to Merida four years ago, David’s love of the industry won over and saw him once again involved in construction and real estate, but this time in Yucatan, Mexico. He can be contacted thru DH Realtors in Merida.

17 Reactions on this Article

It is about time they got rid of the fideicomiso’s and high bank fees for having the fideicomiso in the banks name. At about $550 US every year for nothing it is getting expensive. There was a proposal to remove this but no dought quickly lobbied to be kept by the banks to get free money off foreigners. The problem with real estate in Mexico are fideicomiso’s, not having it in your own name, capital gains tax calculation uncertainty, and the inability to buy a replacement property, I.e., buy something bigger later on, without having to pay the approximate 5% tax all over again on another purchase.

The Fideicomiso is alive and well. The proposal is probably alive and well too, but that is certainly up to the sponsor of the bill.

Additionally, since the Fideicomiso was enabled through a Constitutional Amendment, it would be my understanding that after it passes through the processes in the senate there is still the necessity to have it approved by a majority of states of Mexico. Since there are 32 states I calculate that each of 17 states must approve it even after the senate passes it. I am not an expert on the political processes and I am making some assumptions about the necessity of each of the state legislatures to meet and approve the amendment. I would guess that it might take as long as 2 – 3 years after approval to become law and then probably another year to get it implemented. I think that is an optimistic assessment. I have been a licensed real estate agent in the State of Sonora since 2007 and my experience in Sonora has taught me patience.

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